Retailers like Neiman Marcus are discovering that even high-end shoppers want a good deal, with sales of personal luxury goods falling for the first time since 2009.
According to The Wall Street Journal, falling foot traffic and constant price wars have triggered widespread closure of brick-and-mortar stores, with sales of items such as designer apparel and handbags falling 1 percent last year.
Luxury brands are feeling the pressure from discount stores like TJ Maxx, with about 37 percent of luxury goods sold at less than full price last year, up from 32 percent two years ago. As a result, Tiffany & Co. and Ralph Lauren Corp. both recently ousted their chief executives.
But Neiman Marcus Group Ltd. seems to have been hit the hardest. The company holds nearly $5 billion in debt and has lost $406 million on sales of nearly $5 billion in the year that ended in July. Neiman Marcus also recently abandoned plans to go public.
Online startups like Farfetch.com and Matchesfashion.com are doing their part to force more discounts. In fact, a price tracking firm looked at a recent 24 hours and found that Farfetch’s prices averaged 2 percent lower and Matchesfashion’s 15 percent lower than Neimanmarcus.com’s prices on 32 identical items.
With their equity practically wiped out, Neiman’s owners, Ares Management LP and the Canada Pension Plan Investment Board, recently approached Saks Fifth Avenue parent Hudson Bay Co. about buying the retailer. The goal is to combine Neiman with its main rival to cut costs and increase clout with suppliers.
The company is “well-positioned to deal with both the secular and cyclical changes taking place in the luxury market,” said Neiman board member and Ares Co-Founder David Kaplan. “The brand remains a preferred destination for customers who value the expertise of the store associates and a differentiated product offering as well as for the design community.”